Equity Research article .. your thoughts??

I am an MBA student interested in equity research and I wrote an article at seeking alpha for which I was hoping to get feedback from the pros here.

I have had success getting couple of interviews for the associate position but have had hard luck cracking them. I have been networking, developing research material, sending out resumes etc.

Could you guys with equity research experience critique my article? I have written a research report as well and I am well versed in DCF, comparative multiple valuation, financial modeling etc coming out of business school.

I want to know whats missing, what can be improved as I continuously strive to make my self better and competitive in this field.

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Comments (12)

I am in aero/def ER as an associate. You want 1 piece of advice? Don't write condescending research notes. You have no idea why people have the rating they have unless you have read every piece of research and spoken with every analyst about why they either like or dislike a name. I highly doubt that you have spoken to most of the analyst who follow RIM, and that not because you are an MBA student, that because unless you are paying client, there is no reason for the analyst to talk to you.

Its best to just state your case and support it with factual evidence and always, always be able to source your information. You will never get in trouble that way and investor will allways trust your work regardless or not if they agree with your recommendation.

Also, anyone who has ever argued that there is inherent value in a stock just because it is down 50%+ over some period of time has lost allot of money.

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Thank you for your insights. One of the recommendation I got from an interviewer/senior analyst is being creative or writing in an investment oriented way.

Do you think the way i right is more descriptive. Or my writing style is fine.

Also I thought there was value not because its dropped so much. Like you said I was just stating a fact. It was more cause the stock is close to book value and assuming a buyer pays book value, (no debt or liab so the stock shouldnt go below book value right?) with control premium the stock would be priced at 23-24 at least.

and then I did some valuations taking a median multiple and modeling DCF analysis which gave me a 33 Target price.

Along with the companies forecast shipments for this year + market research forecast I derived the projected sales and hence the growth rate.

I have started writing articles to improve my research writing skills and I am confident of my analytical skills as I can recite DCF in my sleep. This is what I love doing and I want to establish a career in research. I though I write and think creatively, what do you think and how should I improve?

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First I think there is a difference between writing articles and writing ER reports. In ER don't try and sensationalize anything, just state your investment conclusion up front and then go into supporting it. You always want to state your conclusion first, as my PM wont read your entire note (they get hundreds each day from many analyst on many topic). Th format should be:

Investment conclusion:

Supporting bullet 1:

Supporting bullet 2:

Supporting bullet 3:

Done.

Always try and keep topical reports (i.e. reports that are reviewing an event; i.e. earnings report) to 1 page. This 1 page should also include your P&L estimates, stock stats, firm name and disclosures. So in reality try summarizing your investment thesis in 1/2 of a sheet in word. You should be able to fit everything on 1 page and by doing so you will learn to be very succinct in your writing - something that will be very appreciated by your clients. No one wants to read fluff.

In other reports where your are initiating on a company or upgrading or downgrading a stock, use as many pages as you want. Typically an initiation is 20 pages of text with 10-20 pages of supporting tables. (you only do this once of each stock)

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You state what the numbers are, but I don't see much analysis of WHY the PEG is around 0.5 or it's trading below book value or enough explanation of HOW you expect RIMM to add value to its shareholders.

The underlying thesis seems to be, "It's really cheap relative to where the price was before". That's nice, but it's probably cheap for a reason, and what you've presented doesn't dissuade me from thinking it has further to fall.

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I don't know anything about RIMM's sector but is P/BV commonly used there? What's the advantage of emphasizing book value for a communciations equipment type of industry? It doesn't make sense to me.

mhok82 just pretty much said everything my senior analyst told me during my first month on the job.
He also told me to limit the use of adverbs, adjectives, and definitive language. You seem to be pretty confident that some of the things you mentioned are considered "facts". Be ready to tell a PM at Wellington why it's a "fact".

Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.

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Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.

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I write on seeking alpha as well, and I will try to input some of these suggestions to improve my articles and make them a strong asset to present to ER/AM recruiters this fall. Below are some links to some of my best previous writing (read whichever one may interest you) and I was wondering how the WSO community thinks I can improve.

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I write on seeking alpha as well, and I will try to input some of these suggestions to improve my articles and make them a strong asset to present to ER/AM recruiters this fall. Below are some links to some of my best previous writing (read whichever one may interest you) and I was wondering how the WSO community thinks I can improve.

I don't want to be an a-hole but I would like to address your mortgage REITs article, especially the quote below:

"Essentially, these companies make money off the spread of borrowing cheap money through repurchase agreements with large banks affiliated with the Fed and then use the leverage to buy heavily discounted mortgage back securities.

The spread between them is what they pay out as dividends to investors. Currently this spread is extremely high due to near all-time low interest rates, and the fear of toxic debt has beaten down the price of MBSs far below par value."

The mortgage REITs (CYS, ANH, and NYMT) which you are refering to, have portfolios that are invested in 100% Agency RMBS, issued by Ginnie, Fannie, and Freddie. Please look up the prices for agency RMBS pass-throughs and tell me what "heavy discount" you are talking about?
The discount you mentioned could apply to CIM, as these guys are diversified and purchase non-agency paper as well.

The spread you are referring to, is not between the discounted amount (which would never be passed on to investors unless those gains are realized through a sale) and borrowing rates, but between interest income on RMBS securities and borrowing rates.

About 50% of information in that article is misleading and/or incomplete. You pretty much lost all of your credibility and now, I assume you have serious flaws in the other articles as well (without even reading them).

My advice is: become more familiar with what you're writing about.

Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.

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